the best way to predict the future is to create it.

If Only We Knew…

In 2009, the State of New York mandated restaurant chains of 15 of more to disclose the caloric information of all products. The release of this information drastically changed consumers’ purchasing decisions. As one Starbucks employee relayed to me, “No one is buying our baked goods anymore…It’s as if people thought donuts were good for them”.

In the latter half of 2009, Starbucks, McDonalds, and the likes saw a hit (albeit, not drastic) to sales of some of their less-than healthy options. Why? People now had enough information to understand exactly what they were putting in their body.

Consider the implications.

Think about the shirt you are wearing right now as you read this. Where did you buy it from? Who made it? Not what company, but who actually made it? What if you knew that the supply chain responsible for manufacturing that shirt directly caused numerous deaths of young children due to poor safety conditions?

But we don’t know. Most of the time, we just don’t know. Most of the time, we purchase without much deliberation because we simply do not have enough information to fully understand the manner in which companies conduct their operations.

Ceteris paribus, if one company is destroying our planet at much graver levels than its counterpart, you may consciously consume and/or invest in the counterpart. Ceteris paribus, if one company had been faulted for thirty employee deaths relative to its counterpart responsible for zero deaths, you may be inclined to consume and/or invest in the counterpart.

Information Transparency, as applied to financial markets, is the state in which all relevant information is fully and freely available to the public. It is the extent to which investors have access to complete, accurate, and timely disclosure of information. Transparency – openness, communication, and accountability – is a silent prerequisite of a free and efficient market.

Perhaps it is not so much that consumers and investors don’t care, it’s just that they don’t know. If companies are mandated to increase their level of transparency as it pertains to economic, social, and governance facets, it is reasonable to conclude that consumers and investors would make different decisions.

So, what we really need is for the powers that be to regulate efficiently.

[…] Sustainable Investor has examined the topic of transparency in great detail, asserting that perhaps it is not that people do not care, but rather that they do not know. Companies are not mandated to internalize the negative externalities they put forth on this […]